Managing Change In A Maturing Terminal Market

John Vena - Wholesale Market

Produce terminal markets used to be really simple operations fueled by supply and demand and staffed by quaint‭, ‬colorful characters‭ ‬‮—‬‭ ‬usually men‭ ‬‮—‬‭ ‬well-suited to working very physical jobs in the middle of the night‭. ‬Customers typically traveled to the market in their own vehicles to purchase and load product‭. ‬

Our old market on Galloway Street was designed and built in 1959‭ ‬without refrigeration‭. ‬No one saw the need for such expensive equipment‭. ‬It was a‭ ‬“seller’s market‭,‬”‭ ‬and services offered were limited to basics such as making the sale and watching customers pick up their purchases to load their trucks‭. 

Terminal markets are a segment of the produce industry where change typically comes at glacial speed‭. ‬Our Market in Philadelphia‭ ‬was no exception‭. ‬For many years‭, ‬the produce industry has been evolving‭, ‬but like the proverbial frog in the pot‭, ‬as things were heating up around us‭, ‬we just didn’t realize it‭. ‬

In 2000‭, ‬we began a belated initiative to catch up with the needs of our merchants and our customers‭. ‬At that time‭, ‬there were 36‭ ‬merchants operating in the Market‭, ‬the largest among us occupied three or four units‭. ‬

In June 2011‭, ‬just 26‭ ‬merchants moved into our current facility on Essington Avenue in southwest Philadelphia‭. ‬Three merchants in the new building leased five or six units each‭. ‬Since our opening day‭,  ‬we have lost and gained merchants through business failures and the deaths of principles‭. ‬Established firms from outside our Market joined us but found they didn’t like the climate in our facility and moved out‭. ‬Fortunately‭, ‬a couple of new companies comprised of entrepreneurs from within‭ ‬the Market have found success and grown‭. 

Today‭, ‬there are only 22‭ ‬merchants in the Market‭, ‬but we are at full capacity‭. ‬This attrition in the number of merchants has allowed for facility growth among the survivors‭. ‬The larger businesses now occupy from six to nine units‭. ‬In fact‭, ‬our bylaws cap our leases at nine units per merchant‭. ‬It took 10‭ ‬years and a miracle to build our current facility‭; ‬it’s unlikely we will be adding new units‭. ‬And there’s the rub‭, ‬because recently our merchants have been asked to consider an increase to our unit limit‭. ‬Of course‭, ‬this question anticipates further depletion of our merchant ranks and continued growth for survivors‭. ‬

As a member of the last generation of quaint‭, ‬colorful men to work in our Market‭, ‬this is a conundrum for me‭.  ‬In my heart‭, ‬I feel that a strong terminal market requires a certain merchant diversity‭. ‬I have always thought that to succeed‭, ‬we must maintain‭ ‬a facility that encourages many different businesses‭, ‬offering many different products‭, ‬staffed by interesting‭, ‬enthusiastic characters in order to draw in customers‭. ‬However‭, ‬the attrition in our ranks has created opportunity‭. ‬My company and others in the‭ ‬Market have been able to increase our operational footprint dramatically‭, ‬because of the shrinking number of competitors‭. ‬As business owners in our Market consider their future and elect to grow or retire‭, ‬the loss of merchants may continue‭.‬

Looking ahead‭, ‬the shareholders of our Market will have to answer many questions‭. ‬Certainly shrinking numbers of merchants challenge the traditional concept of the terminal market‭. ‬Is this definition still valid‭, ‬and does it still truly serve the best interests of the customers and the merchants‭? ‬How can we best manage the allocation of space in our facility to maintain its character as a market‭? ‬Fewer‭, ‬larger firms would have an easier time developing the resources required to meet customers’‭ ‬demands‭. 

There are three points to consider here‭. ‬First‭, ‬what number of merchants constitutes a viable‭ ‬“marketplace”‭ ‬perceived by customers to be the place they can get the best deals‭? ‬Second‭, ‬is the terminal market as we know it the best model‭ ‬for serving the independent retailer and small to mid-sized foodservice distributor‭? ‬Third‭, ‬operational cost in a market is always amplified by the need to maintain the common areas required for customer service activities‭. ‬With a fixed number of units‭, ‬what percentage of our facility can be entrusted to one company‭? ‬The loss of a large tenant increases the heavy burden of shared‭ ‬costs for all the services a building such as ours requires‭.‬

And what about new faces‭? ‬We have had successful startups join our group of merchants‭. ‬It happened at a time when the Market had‭ ‬vacant units and the cost of entry was very reasonable‭. ‬Allowing large established firms to easily and permanently absorb more‭ ‬units may prevent the enlistment of cash-strapped‭, ‬but hard-working newcomers‭. ‬Larger‭, ‬stronger firms typically take a larger piece of the business pie‭. ‬Will that push smaller operators toward failure or‭, ‬at the very least‭, ‬to choose early retirement or a‭ ‬career change‭? ‬Either way‭, ‬our merchant roster is cut‭. ‬But any good philosopher will tell you that change is inevitable‭. ‬We can’t stop it‭. ‬We can only try to manage it‭. ‬Romantic notions of what a terminal market is supposed to be‭, ‬held by quaint characters‭ ‬like me‭, ‬are likely better off relegated to stories told over a cocktail at industry functions‭ … ‬not held as a standard for future development‭.‬

John Vena is the owner of John Vena Inc‭., ‬a family owned and operated produce business located in the Philadelphia Wholesale Produce Market‭. ‬Founded in 1919‭, ‬the company is a fourth generation family business bearing the name of John Vena’s grandfather‭.‬